Nishat Power Ltd beats expectations for 2QFY23, posts 47% profit increase

KARACHI: Nishat Power Limited (NPL) posted a 47% increase in net profit for the quarter ended December 31, 2022, beating market expectations of a 6% decline in earnings. The company disclosed its financials to the Pakistan Stock Exchange (PSX) on Monday.

The Board of Directors (BOD) of NPL in their meeting held on February 13, 2023 posted the financial results for the half-year and quarter ended December 31, 2022. The power company also announced an interim cash dividend of 20% (Rs 2 per share). 

During the second quarter of fiscal year 2023 (2QFY23), net sales witnessed a decline of 46% to Rs 2,242 million compared to the same period last year (SPLY). The decline in sales was due to lower dispatches, which is the sale of electricity to consumers. However, lower load factor and efficiency measures resulted in NPL’s cost of goods sold (COGS) to decline by a massive 90% to Rs 1,050 million. This resulted in a gross profit of Rs 1,192 million, up 31% over the SPLY. 

Lower-finance costs due to a reduction in short-term borrowings and increase in other income of the company led to a Profit After Tax (PAT) of Rs 1,102 million, an increase of 47% over the SPLY. This resulted in an Earnings Per Share (EPS) of Rs 3.11 compared to Rs 2.10 year on year (YoY). 

These results beat the lower expectations published by Arif Habib Limited (AHL) research a few days ago which predicted that NPL would post an EPS of Rs 1.97 per share and a PAT of just Rs 699 million for the quarter. It also predicted a sales decline of 65% whereas NPL had a sales decline of 46%. AHL research also did not expect any payouts for the quarter, however, the power company announced a 20% cash dividend.

It should be noted that brokerage houses’ estimates can often deviate from actual financial results. Equity houses’ research reports are good insofar as they paint a general picture of industry-specific events which are not always available to the general public. But accurate predictions of data in different industries seldom turn out correct. 

During the half-year ended December 31, 2022, the company’s sales increased 39% YoY mainly due to 71% YoY rise in furnace oil prices, which is the primary fuel for NPL’s plants. However, dispatches declined by 28% YoY. According to the AHL research posted after NPL’s financial announcement, the decline in dispatches is due to overall decline in electricity demand in the country due to economic slowdown. The overall country power generation also decreased by 4% YoY during 2QFY23 as FO-based generation went down by 88% YoY.

On Monday, NPL’s share at the PSX closed at Rs 18.92, up 7.5% on a daily basis. The volume traded in the Monday trading session was 3.87 million shares.

NPL’s principal activity is to build, own, operate and maintain a fuel fired power plant based on Reciprocating Engine Technology having gross capacity of 200 MW in Jamber Kalan, Tehsil Pattoki, District Kasur, Punjab, Pakistan.